Euro zone jobless hits another record, but better news on inflation

Friday 01 March 2013 14.08
Euro zone unemployment rate hits new high of 11.9% in January
Euro zone unemployment rate hits new high of 11.9% in January

Unemployment across the euro zone has risen to a record 11.9% but inflation has fallen to its lowest level in two and a half years, official figures showed today.

Eurostat, the EU's statistics office, said nearly 19 million people are unemployed in the euro zone after an increase of around 200,000 in January.

That took the rate up from January's 11.8%, the previous record.

The increase was not a big surprise given that the euro zone economy as a whole is in recession and expected to continue to contract in the first half of 2013.

The overall rate masks huge divergences though. While Greece and Spain languish under the weight of mass unemployment of over 25%, economies like Germany are operating with relatively low levels around the 5% mark.

Figures earlier this week showed that the Irish standardised unemployment rate in February stood at 14.1%, unchanged from the revised January rate.

However, those Europeans unable to find work may get some relief if the fall in inflation prompts the European Central Bank to cut interest rates again.

The statistics agency reported that consumer prices rose 1.8% in the year to February, down from the previous month's 2% and expectations for a fall to 1.9%.

It also takes inflation below the European Central Bank's mandated target of 2% for the first time since November 2010 and to its lowest level since August of the same year.

Analysts said the fall may prompt it to cut its benchmark rate from the record 0.75% as soon as next week. A cut in interest rates would make it cheaper for businesses and families to borrow, spend and invest - thereby generating growth in the economy.